woensdag 26 november 2003

Fiber to the People

"Burlington, Vermont, is building a network. Like many municipalities across North America, it has decided to construct an advanced fiber network on its own. The AFN is being deployed first to support city services. Then, as part of the four-phase project, this municipality of just 40,000 will extend blazingly fast Internet service to businesses and residences. To many, this just looks like more socialism from Vermont. Why should government be in the business of providing high-speed networks? Isn't that what free markets are for? Haven't we all learned that the market is more efficient at supplying goods and services? Do we really need to rediscover the failings of Karl Marx at 100 megabits per second?

The answer, as Cornell economist Alan McAdams argues, has nothing to do with Karl Marx and everything to do with basic economics. AFNs are natural monopolies. That doesn't mean that there can be only one, but rather that if there is one, then it is far cheaper to simply add customers to the one than to build another. The electricity grid in a local neighborhood is a good example of a natural monopoly. Sure, we could run four wires to every home, but do we really need four electricity companies serving every home?"